Divorce Dollars and Sensehttp://blogs.forbes.com/jefflanders
Wed, 29 Jul 2015 13:34:00 +0000en-UShourly1http://wordpress.org/?v=3.9.2Divorcing Women: How Much Do You Know About Your Husband’s Retirement?http://www.forbes.com/sites/jefflanders/2015/07/29/divorcing-women-how-much-do-you-know-about-your-husbands-retirement/
http://www.forbes.com/sites/jefflanders/2015/07/29/divorcing-women-how-much-do-you-know-about-your-husbands-retirement/#commentsWed, 29 Jul 2015 13:25:00 +0000http://blogs.forbes.com/jefflanders/?p=2315Achieving a secure retirement should be a primary financial goal for all adults. Ideally, married couples work as a team to plan for their retirement, invest and save according to strategies they discuss openly with each other and their financial and tax advisors, and check in on a regular basis to make adjustments as needed.

In the real world, though, things often work quite differently –and not nearly as well.

Fidelity Investments recently published the 2015 edition of its online biennial Couples Study, analyzing the retirement and financial expectations and preparedness of 1,051 committed couples (at least 25 years old, and with a minimum annual household income of $75,000 or at least $100,000 in investible assets).

The results show that for many couples, there are significant differences in what each partner knows and expects about their retirement financing. This infographic lays it out: Although 72% of couples surveyed said they communicate exceptionally or very well about financial matters, 60% of the respondents disagreed on what their Social Security payments would be in retirement, and more than 40% couldn’t even correctly identify how much their partner earns! How’s that for a major disconnect?

Fidelity’s study further showed that almost half of the couples surveyed had no idea how much they will need to save to maintain their current lifestyle in retirement. American couples, the study says, are worrying more, and planning less, than even two years ago. More than half of respondents (51%) reported worrying about outliving their savings in retirement. (In 2013, 42% reported that worry.) Despite that, 36% say they haven’t even thought about developing a retirement plan. (In 2013, that figure was 28%.)

This is not good news, and clearly Fidelity and companies like it must see a role for themselves in improving the situation. There is reason to hope that investment companies will make it easier and more accessible for people to: 1) learn and understand how much they need to retire comfortably, and 2) devise strategies to ensure they have the required resources available.

As a divorce financial advisor, I’ve noticed that in many marriages where there has been some retirement planning, savings, and investment, it’s typically the husband who’s done it –and the wife who’s, for whatever reason, uninvolved and essentially in the dark. Since my professional focus is on helping women get through financially complex divorces, it’s a major concern to me that wives participate so little in the major financial decision-making of their marriages. In the event of a divorce, lack of financial literacy has real implications for a woman’s financial future. For example, I’ve had clients come to my office convinced that they were not entitled to receive any part of their husband’s 401(k) or other retirement plan. They’ve taken their husband’s word for this, when nothing could be farther from the truth!

How well do you know what’s going on in your marital financial portfolio? Whether or not divorce is in your future, if you don’t have a good working knowledge of your family’s finances, it is past time to get up to speed. You need to be familiar with all aspects of your income, expenses, assets, and liabilities. If you’re not, then get to work filling in those information gaps. You and your husband don’t have to agree on every little financial detail of your married life, but you do need to have the same information.

This is especially true of retirement savings and investments. I recently wrote about the challenges divorced women face in retirement planning. The best way to meet these challenges is to educate yourself early on. Don’t let ignorance stand in the way of your financially healthy retirement, and don’t let somebody else hold all the keys to your secure future. That applies whether you’re already divorced, beginning the divorce process, or happily married with every intention of staying that way for years to come.

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Jeffrey A. Landers, CDFA™ is the creator of the Think Financially, Not Emotionally® brand which encompasses books, seminars, workshops, online content (articles, eLearning courses, webinars, etc.) and other products and services that inform women and their advisors about the financial impacts of divorce and helps them stay focused on money issues throughout the process –before, during and after.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/07/29/divorcing-women-how-much-do-you-know-about-your-husbands-retirement/feed/0Why Did Ben Affleck And Jennifer Garner Wait To Split Until After Their Tenth Anniversary?http://www.forbes.com/sites/jefflanders/2015/07/15/why-did-ben-affleck-and-jennifer-garner-wait-to-split-until-after-their-tenth-anniversary/
http://www.forbes.com/sites/jefflanders/2015/07/15/why-did-ben-affleck-and-jennifer-garner-wait-to-split-until-after-their-tenth-anniversary/#commentsWed, 15 Jul 2015 14:54:00 +0000http://blogs.forbes.com/jefflanders/?p=2307It’s been all over entertainment news headlines: Ben Affleck and Jennifer Garner, celebrated Hollywood couple and parents of three children, have decided to divorce. The announcement was made one day after their tenth wedding anniversary. Why is that significant? Is there something to the date?

As with any breakup, there are bound to be numerous factors at work, and I don’t have any inside information on this particular case. However, as a divorce financial advisor, I can identify several possible reasons for the timing.

Establishing A Date of Separation

Remember, no matter what else it might represent –the end of a once-loving relationship, a new parenting arrangement, the beginning of separate lives –legally speaking, divorce is about division of assets and debts. It’s important for the courts to designate a formal Date of Separation (DOS) for the purpose of determining various property interests and establishing a valuation date for certain assets.

In some cases, pinpointing a DOS can be tricky –especially if the parties disagree. By making a formal, joint announcement of their intention to divorce, Affleck and Garner have streamlined that whole process, taking any uncertainty out of the picture, and reinforcing their stated desire for a cooperative, amicable split.

But, why do it one day after their tenth anniversary?

Psychological Reasons

Psychologically, ten years –an even decade –represents a good chapter of our lives. It makes emotional sense to begin the next chapter with an announcement of the previous chapter’s conclusion.

It’s also often true that by the time a couple shares publicly that their marriage is all but over, the hard emotional work of the breakup has already been done. They are through agonizing over whether splitting up is the right thing to do. Perhaps there is some relief in each having made their best efforts to work things out, and coming to terms with divorce being the best answer. In short, a couple might be essentially done with thinking emotionally; now, they’re ready to think financially.

Financial Reasons

Financially speaking, waiting to end a marriage until after its tenth year can be a good move. As an exceptionally high-earning couple, Affleck and Garner may not be primarily concerned with some of these factors. However, they are important for most divorcing women to consider.

Spousal Support

In California, where the Affleck/Garner divorce will be adjudicated, marriages of ten or more years are deemed “long-term” marriages. That designation has implications for the amount and duration of spousal support that can be ordered by the court. After a long-term marriage, the court retains jurisdiction over such decisions, and a judge can award the lesser earning spouse alimony of greater amount and/or duration than if the marriage had lasted less than ten years.

Social Security and Military Benefits

If a marriage passes the ten year mark, the lesser earning spouse –still usually the wife –will be entitled to receive Social Security benefits based on the other spouse’s earning record, when she reaches an eligible age. She is not eligible for this benefit if her marriage lasted less than ten years.

The same is true of certain military benefits. Ten years of marriage, it appears, signifies to the government a sufficient degree of seriousness to warrant the entitlement to federal benefits for the lesser earning spouse.

Provisions of a Prenuptial Agreement

I don’t know if Affleck and Garner have a prenuptial agreement in place, or if so, what it says. If they did have a prenup, it’s possible that the agreement allowed for different terms after ten years of marriage. Several such provisions might have influenced the timing of the announcement of their decision to divorce.

For example, some couples include a clause in their prenups specifying that after a certain number of years of marriage, an additional financial benefit is to be paid to the dependent spouse in the event of a divorce. In some cases, the agreement states that the lower earning spouse will receive a specific sum for each year of the marriage. What that amount is would of course depend on the assets and earnings of the wealthier spouse.

Many prenups contain something called a “sunset provision,” which typically states that after X years of marriage, the entire prenup, or certain of its provisions, becomes null and void. If Affleck and Garner have such an agreement, it might have made good sense to delay their formal split until after ten years had passed.

While celebrity divorces have no direct effect on most of us not in the Hollywood limelight, they can certainly provide food for thought. Census data show that in the U.S., the average duration of first marriages that end in divorce is eight years. If you’ve been married almost a decade and sense that divorce is in your future, there might be good reasons to take a cue from the Affleck/Garner case and stick it out for ten years and a day.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/07/15/why-did-ben-affleck-and-jennifer-garner-wait-to-split-until-after-their-tenth-anniversary/feed/4Divorced Women: How Will You Retire?http://www.forbes.com/sites/jefflanders/2015/06/16/divorced-women-how-will-you-retire/
http://www.forbes.com/sites/jefflanders/2015/06/16/divorced-women-how-will-you-retire/#commentsTue, 16 Jun 2015 16:42:00 +0000http://blogs.forbes.com/jefflanders/?p=2300All women face significant obstacles to achieving a financially healthy retirement. But while married women have the comfort of being part of a team that is planning to retire together, divorced women are solely responsible for their own financial well-being into their later years. That means that for divorced women, the financial challenges posed by retirement are both multiplied and magnified.

For example, if you are a divorcing or divorced woman planning retirement, you will have to face the hurdles such as:

Longevity

The Social Security Administration reports that a man reaching age 65 today can expect to live, on average, until age 84.3. For women, that average life expectancy is 86.6. Women live longer than men; therefore, their retirements can be expected to last longer and cost more. That means you’ll need to have more money saved.

Less Income

The gender wage gap is a real thing. Women earn an average of 77 cents for every dollar earned by men. Earning less means not only do women have less money available to set aside for retirement, but also that their Social Security benefits will be significantly less than what their male counterparts will receive.

For the married woman, this is troublesome. For the divorced woman, it may be life-changing. With alimony “reform” sweeping the nation, permanent alimony which would have provided a divorced woman some financial security in her later years has been all but eliminated. Also note that if you were married less than 10 years, you won’t be able to collect Social Security benefits based on your ex-husband’s earning record.

Less Savings

When you earn less, you save less. But even when women save aggressively, they are often saving for things other than their own retirements.

Women will often ignore planning for their futures to make sure instead that there is money for their child’s college tuition or first home. As much as women want to give their children a leg up, financially, it can do more harm than good if their own financial health is at risk.

Lower Earning Potential

Not only do most women earn less than men, but many women re-entering the job market after time away will find that they simply don’t command the income they once did. Taking time away from paid work, as rewarding as it can be in other ways, is a no-win situation, financially. To do a stint as a stay-at-home-Mom, women sacrifice their peak earning years and career momentum. Unfortunately, many of them don’t fully realize the financial ramifications of that decision until it’s too late.

Less Financial Literacy

In general, women are less familiar with financial matters and report less confidence in their ability to invest than men. I think this is a problem even for happily married women, but for divorced women, lack of financial literacy is a problem with immediate and potentially severe consequences. If you’ve left the major financial decisions to your husband during your marriage, you won’t have much know-how for investing when you’re divorced. Without that basic competence, a retirement savings strategy may seem out of reach.

What can you do?

As a divorced woman planning retirement, the cards are certainly stacked against you. Here’s what you can do about it:

Educate yourself.

Devote time and effort to learning the basics of personal financial management and investing. There’s nothing about this that can’t be learned – it’s a skill just like any other, and if you commit to getting up to speed, you will.

Get on it early.

As a divorced woman you need to begin your retirement savings as soon as possible. If you are in the settlement negotiation process, make sure your team is advocating for terms that will serve you well where retirement is concerned.

Save as much as you can.

It’s important to think of retirement savings as a commitment. It’s not something you do with any money you happen to have left over at the end of the month; rather, your savings should be a high priority. Prioritize needs over wants in your spending, and make no mistake: Retirement savings is an absolute need.

Modify your lifestyle.

As painful as it can be, the reality is that divorce deals a significant financial blow – and women, unable to recoup those losses in the job market as quickly as their ex-husbands can, take the blow harder and suffer longer from it. Many divorced women simply can’t live as they used to while married.

You might need to live somewhere less expensive. You might need to put off major purchases that aren’t absolutely necessary – no more trading in your car for a new one every three years, for example. Wherever you can cut back on your current spending in favor of saving for the necessities of later life, do it.

Work with professionals.

If you are re-entering the work force, you want to earn the most you possibly can. It’s worth your time to consult with a vocational expert to see where your skills command the highest income in the job market where you live.

To make your settlement last as long as possible and keep your tax exposure to an absolute minimum, you’ll need to consult with a financial advisor. For the best, most appropriate guidance, find someone with expertise in the specific financial needs of divorced women.

With a commitment to education, good planning, disciplined savings, maximized income, and professional guidance, there is good reason for you to expect a financially secure retirement. On the other hand, without those things, there is good reason for concern. I sincerely hope you’ll make your secure retirement a priority, and not a cause for worry.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/06/16/divorced-women-how-will-you-retire/feed/3How Will Proposed Changes In Custody Laws Affect Divorcing Women Financially?http://www.forbes.com/sites/jefflanders/2015/05/07/how-will-proposed-changes-in-custody-laws-affect-divorcing-women-financially/
http://www.forbes.com/sites/jefflanders/2015/05/07/how-will-proposed-changes-in-custody-laws-affect-divorcing-women-financially/#commentsThu, 07 May 2015 13:15:00 +0000http://blogs.forbes.com/jefflanders/?p=2296I’ve written before about alimony reform and how new laws eliminating lifelong alimony and reducing judicial discretion can pose real financial hardship to divorcing women. Unfortunately, there’s another legislative trend sweeping the nation that’s just as concerning. According toThe Wall Street Journal, some 20 states are considering laws that would substantially change the way child custody is decided in divorce.

As with alimony reform, much of the proposed “shared parenting” legislation targets judicial discretion. Rather than evaluate individual cases based on their circumstances, judges will be strongly encouraged, or even mandated, to enact custody arrangements that are as close to 50-50 as possible. In some states, including Colorado, New York, and Washington, the proposed laws make that the mandatory default. To make a different arrangement, it must be proven that the child would not be best served by spending substantially equal time with each parent.

Such legislative changes have been proposed by men who feel they’ve been treated unfairly by a system that has, for many reasons over the years, favored mothers as custodial parents. I understand that. As a father myself, I can absolutely imagine how painful it would be to be unfairly denied time with my children.

But here’s the thing: that’s what judicial discretion is for! Experienced, knowledgeable judges are empowered to evaluate the circumstances of each case before them, and direct the litigants to the fairest possible solution to their individual case. The proposed laws remove or severely limit that flexibility. To my mind, that’s the wrong solution. If judges need to be reminded to be fair to fathers when considering custody arrangements to avoid systemic bias, that’s one thing. But to tie the hands of family court judges in child custody decision-making, steering them to a one-size-fits-all (unless you can prove it doesn’t) solution, is to show complete disregard for how nuanced such cases can be.

And of course, some cases are not just nuanced, but dangerous. Critics of the proposed child custody laws rightly contend that insisting on a 50/50 custody arrangement gives undue influence to abusive husbands, and wrongly places the burden on the spouse in the weaker position – usually the wife – to have to prove that the arrangement is not right. Furthermore, say the critics, the vast majority of custody cases are settled out of court. The ones that go to litigation are the ugliest and most contentious cases – arguably the ones for which shared custody, an arrangement requiring maturity and cooperation, is least likely to succeed.

What does this mean for divorcing women, financially? Well, the sad truth of the matter is that some fathers fight for 50/50 custody with the primary, cynical goal of reducing their financial obligations to their ex-wives. With “shared parenting” legislation, I foresee single mothers having to make do with less financial support, but not necessarily having less of the parenting responsibilities. Many divorced mothers can tell you that no matter what the agreement says on paper, it’s the mother who shoulders more of the work of child-rearing.

Child support, too, is undergoing “reform.” The New York Times recently reported about a demoralizing cycle in which men who can’t afford to make payments are jailed for failure to pay, then lose their jobs, then get deeper in arrears with child support payments, and so on. This is certainly a problem. Reform advocates claim that the current practice of calculating child support on the basis of imputed income (what a person is expected to earn) instead of actual income is unfair and unrealistic when jobs are hard to find and making payments is just not possible. The federal government is reportedly proposing to use actual income to calculate child support and also to consider that the noncustodial parent must have enough to live on himself.

At first glance, this seems reasonable, and even good – so why do I find it troubling? Well, as a divorce financial professional who works exclusively with women, I can tell you that such legislation could have many unintended consequences. Where some see progress toward a fairer approach to child support, with my experience in this field I see potential for unchecked fraud and abuse. If actual income as opposed to imputed income is used to calculate child support payments, I predict you will see people quitting or changing jobs when divorce is on the horizon. Business owners will pull every trick in the book to make sure they show little or no income. Ex-husbands will have an easier time shirking their financial obligations, and ex-wives (and their children) will be left to figure out how to make ends meet.

Together, alimony reform, “shared parenting” legislation, and using actual income vs. imputed income for child support payment calculations spell financial disaster for divorcing and divorced women. My advice is to stay on top of developments in your state, and work with your attorney and divorce financial advisor for strategies to best cope with the implications of new or proposed legislation.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/05/07/how-will-proposed-changes-in-custody-laws-affect-divorcing-women-financially/feed/40Divorcing Women – Know The Laws Affecting Your Beneficiary Designationshttp://www.forbes.com/sites/jefflanders/2015/04/09/divorcing-women-know-the-laws-affecting-your-beneficiary-designations/
http://www.forbes.com/sites/jefflanders/2015/04/09/divorcing-women-know-the-laws-affecting-your-beneficiary-designations/#commentsThu, 09 Apr 2015 15:38:00 +0000http://blogs.forbes.com/jefflanders/?p=2291In an earlier post, I wrote about how important it is for a divorcing or recently divorced woman to update key documents so they accurately reflect her new status. A major part of that financial housekeeping involves revisiting the named beneficiaries on life insurance policies, retirement plans, annuities, TOD (transfer on death) bank and brokerage accounts, and any other instruments on which a beneficiary is designated.

Naturally, it made good sense to name your husband as beneficiary when the two of you were happily married. But now that you’re divorcing or divorced, it makes even better sense to name someone else instead. So if you haven’t already, now is the time to think about who should receive benefits upon your death –you’ll need to officially designate those persons as beneficiaries on all applicable forms.

But remember, if the divorce proceedings have already started, you will not be able to change any of these designations and will have to wait until the divorce is finalized. You can change designations prior to the filing of divorce, but even then, be aware of the following:

If you and your husband share a financial advisor, that advisor might inform your husband about the change. Also, beneficiary designations on ERISA type of retirement accounts – 401(k)s, 403(b)s, pensions, etc. (not IRAs) — require the written consent of the other spouse in order to change beneficiaries.

You might be under the impression that you covered those bases already, when you rewrote/revised your will to disinherit your ex-husband. That isn’t so! Let me stress: Beneficiary designations supersede whatever is specified in your will. That means even if you’ve changed your will, he could still inherit certain assets – unless you also specifically changed the beneficiary designations on each one. And let me be clear, once again: Because of elective share rights, you cannot completely disinherit your spouse until the divorce is finalized, and you can’t even partially disinherit him once divorce proceedings have begun.

However, once you’re legally permitted to do so, changing beneficiary designations is not a chore you want to put off, as leaving it undone can be a tremendously expensive mistake. Should you die without naming new beneficiaries, your ex-husband could stand to receive assets you would never in a million years have intended for him to inherit. More importantly, your children, or whomever else you would really want to receive those benefits, could be left out in the cold.

Some states have enacted laws to try to prevent situations like the ones I just described, and they have enacted laws that give life insurance carriers a measure of flexibility regarding whom to pay, and when.

For example, in Florida, a 2012 legislative change gave insurance carriers significant latitude in determining to whom benefits should be paid. An insurer can review the marital status of the deceased, and the relationship between the deceased and their stated beneficiary. If the deceased is listed as single, divorced, or married to someone other than the named beneficiary, the insurer can legally pay benefits to a secondary beneficiary instead.

Missouri has taken a slightly different approach to the problem. The law there now specifies that unless a former spouse is specifically renamed as the beneficiary after divorce, it is assumed there that life insurance benefits should be paid to someone else. (Although, according to this article, this statute does not apply to all policies.)

As you might imagine, issues regarding beneficiaries can be problematic for divorced women. Since ex-wives can be named as beneficiaries and existing life insurance policies can be used to insure payments of alimony and child support, some of these new laws might void your right to collect as an ex-spouse, even though it was intended that the life insurance was for your benefit. For added certainty, make sure you are renamed as beneficiary once the divorce is finalized.

On one hand, new laws concerning beneficiaries can be seen as positive, protective measures. Under some of these new laws, if you neglect to change your named beneficiaries after divorce, your state’s laws might prevent your ex from collecting the proceeds of your life insurance policy. On the other hand, though, it is potentially troubling that the state could have the authority to second-guess your wishes after your death. It’s clearly best to make your wishes explicitly and legally known to all concerned, well in advance.

On top of all of the above, should you (or your estate) become embroiled in a legal battle over beneficiaries that reaches a federal court, there is another factor to consider. The U.S. Supreme Court has ruled that when a conflict exists between federal and state laws in such cases, the federal law prevails. That is, even if an applicable state law says that divorce automatically removes an ex-spouse as beneficiary, federal law could negate that. In fact, court decisions have been made in favor of the named beneficiary even when that person has signed a valid spousal waiver!

The clear take-away from all this: Change each and every one of your beneficiary designations individually, and do it as soon as you can legally do so. Neglecting that paperwork could cost your intended beneficiaries untold time, expense, and legal trouble trying to collect the benefits you wished them to have.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/04/09/divorcing-women-know-the-laws-affecting-your-beneficiary-designations/feed/2Divorcing Women: Don’t Fall Victim To Your Husband’s Tax Shenaniganshttp://www.forbes.com/sites/jefflanders/2015/04/01/divorcing-women-dont-fall-victim-to-your-husbands-tax-shenanigans/
http://www.forbes.com/sites/jefflanders/2015/04/01/divorcing-women-dont-fall-victim-to-your-husbands-tax-shenanigans/#commentsWed, 01 Apr 2015 19:16:00 +0000http://blogs.forbes.com/jefflanders/?p=2283It’s that time of year again: Americans everywhere are gathering their tax documents, visiting their accountants, filling out the proper forms, and submitting their income tax returns to the Internal Revenue Service. The process isn’t necessarily “easy.” Every year, the tax code seems to get increasingly nuanced and complicated, and if you’re a divorcing woman, you could be facing additional unique challenges, as well.

The potential tax trouble for you as a divorcing woman primarily lies in filing a joint return with your husband. It’s could be dangerous financially, because if it should come to light later that taxes have been underpaid, it won’t matter to the IRS which of you was responsible. If the return was filed jointly, the government can go after you both… even if you didn’t personally earn one dime of the reported income! What’s more, you will still be liable for errors and omissions in joint tax returns even after your divorce.

Some women insist that their divorce settlement agreements should include a provision that if there are tax issues to be rectified down the road, their ex-husbands are responsible. On the surface, that sounds reasonable, and you can certainly hope that your husband would abide by such a provision. Understand, however, that the IRS is not bound by your divorce settlement agreement, no matter what it says about who is responsible for taxes. As far as the government is concerned, if you’ve signed the tax return, you own the consequences… and if taxes are owed, you can be sure they will come after you, as well as your ex, for payment.

This can be a tremendous burden if your husband has underreported income, hidden assets, and/or claimed improper deductions or tax credits, or engaged in other dishonest shenanigans. Taxes, interest, and penalties can quickly add up to staggering amounts, and you could find yourself owing the federal (and your state) government many thousands of dollars through no fault of your own.

How can you protect yourself against being pursued for tax debt that isn’t fairly yours?

Well, first of all, if you have even an inkling that your husband is not approaching his taxes with total honesty and integrity, you should think about filing a separate tax return. Under the provisions for “Married Filing Separate” (MFS) status, you would be responsible only for taxes on income subject to reporting on your individual return. Using MFS status might mean that in total, you and your husband will pay more in taxes than if you’d filed jointly, but believe me, it will be worth it not to be considered responsible for a fraudulent return.

If it’s too late to file separately, all is not lost. The IRS recognizes that there are innocent spouses who sign joint income tax returns unaware that anything was amiss, and further recognizes that these innocent spouses need to be protected. In fact, you can formally apply for Innocent Spouse Relief, which may absolve you of responsibility for paying tax, interest, and penalties if your husband is found to have made false statements on your joint return.

Obtaining innocent spouse status isn’t a walk in the park, however, and it doesn’t happen in an instant. You will have to prove that at the time you signed the joint tax return, you didn’t know, and further, that you had no reason to know, that there was an understatement of tax. That can be difficult to establish in all but the most black-and-white circumstances. Indeed, you might need a forensic accountant to help make your case.

To decide whether you qualify for relief, the IRS will consider your financial situation, your education and business experience, and even whether or not you asked any questions about items on the return when you signed it. They may determine that you qualify for partial relief, i.e. that you might have known about some of the understated income, but had no reason to know about another portion.

My advice is to be proactive, and not to leave it to the IRS to determine how much you know about your marital income and tax situation. As with so many financial matters, it is always better to be knowledgeable early on. The more you know about your husband’s business, the less likely you are to sign a joint tax return you can’t stand behind.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/04/01/divorcing-women-dont-fall-victim-to-your-husbands-tax-shenanigans/feed/0How Women Can Become More Comfortable Discussing Moneyhttp://www.forbes.com/sites/jefflanders/2015/03/10/how-women-can-become-more-comfortable-discussing-money/
http://www.forbes.com/sites/jefflanders/2015/03/10/how-women-can-become-more-comfortable-discussing-money/#commentsTue, 10 Mar 2015 13:11:00 +0000http://blogs.forbes.com/jefflanders/?p=2277Over the years, I’ve helped scores of women work through their financially complex divorces. But, sometimes, getting the conversation started can be a little tricky. After all, anyone who needs my help must be able to talk frankly about money, and the truth is, many women are just not comfortable doing that.

It’s a phenomenon Fidelity recently explored in its 2015 Fidelity Investments Money FIT Women Study. The research was conducted to measure how women, in age groups from Generation Y to seniors, view and address their finances, including obstacles that may hold them back from being more engaged –and from my perspective as a divorce financial advisor, the results were troubling. For example:

The vast majority (80%) of women who participated in the survey said they have refrained from discussing their finances, even with close friends and family. The most common reason cited was “It’s too personal” (56%), followed by “I don’t want those I’m close with to know this information” (35%), “It’s uncomfortable” (32%), and “I was raised not to talk about finances” (27%).

Only 47% said they would be confident discussing money and investing with a financial professional on their own. (By contrast, 77% would discuss medical issues with a doctor on their own.)

While 82% are confident managing day-to-day budgeting, their confidence slips when it comes to longer term financial planning. Of those surveyed, 62% are confused about navigating their future financial path.

Why does it matter if women aren’t comfortable talking about money? Because women must be as easily conversant and readily knowledgeable in financial matters as men are. If they’re not, they’re more likely to be taken advantage of –in divorce, and in many other areas, as well.

Are you someone who needs to increase your comfort level for discussing money? If so, try these tips:

Take yourself to school.

There are many excellent resources for women who want to learn more about their finances. If the topic makes you anxious, hit the books! Knowledge is power –and it’s time to claim it yourself, instead of leaving it to others.

Information is available for every level of investing, real estate, debt management, taxes, and of course, securing your financial future before, during, and after divorce. Choose reputable sources, and avoid sales pitches disguised as general information. If the idea of a formal course of study appeals to you, check into classes at your local community college.

“Women should feel empowered, not overwhelmed by finances,” Rebecca Wiggins, Executive Director of AFCPE®, told me. “There are many tools and resources available to help educate women about their finances, from websites like NEFE’s Smart About Money and budget programs like Mint and YNAB to workshops and courses taught at a community center, college, or YWCA.”

Subscribe to a financial magazine.

Even if learning about personal finance isn’t tops on your “to-do” list, read a financial magazine to broaden your horizons. There are financial aspects of all current events and trendy topics, and these angles can be interesting in ways you didn’t think possible.

Practice talking about money.

Despite what you may have been raised to believe, talking about money isn’t necessarily rude. You don’t have to divulge information you’d prefer to keep private, and you don’t have to fish for details of your friends’ financial lives. Just begin to include financial topics in your conversation. For example, did you catch Patricia Arquette’s Academy Award acceptance speech? Her remarks would make an excellent springboard for discussion about wage inequality, which could lead to an exchange of strategies for asking for a raise at work, which could lead to a conversation about 401(k)s, etc.

Financial matters are part of our lives. It needn’t be awkward to discuss them, and you can do it without sharing personal details socially.

Consult with a professional.

You do want to share details with paid professionals, though. Whatever your particular need, there are specialists whose job it is to help you with it. Today’s financial portfolios are exceedingly complex, and you may decide to enlist professional guidance to get a good working knowledge of yours.

“Oftentimes it helps to meet with a professional,” Wiggins said. “Accredited Financial Counselors (AFC®) provide unbiased guidance to help clients work through financial challenges, identify financial opportunities, and develop successful strategies for achieving long term goals.”

Realize that money does not define you.

Keep money in perspective. There will always be people who have more or less money than you do. And, while money is definitely important – it gives us security, as well as some of the material things we want in life — your net worth doesn’t represent your value as a person.

When you distance your identity and emotions from your money, you’ll find it’s easier to discuss it as you would talk about building a house. In fact, any “taboo” about discussing financial matters, especially in general terms, can soon begin to seem silly.

Commit to improvement, but don’t expect to become an expert overnight.

There’s plenty to learn about managing money over a lifetime, and you won’t know it all tomorrow. Whether you’re embarrassed at what you don’t know, or simply have an ingrained reticence when it comes to discussing financial matters, you need to make changes over time.

Fidelity did uncover some good news, as well. For instance, the overwhelming majority of women surveyed say they want to get more involved in their finances. That’s music to my ears because when women commit to improving their financial literacy, the effects go far beyond what they learn about money.

Talking openly about finances with your husband, preferably before you are married, is an excellent way to strengthen your relationship. Share your short- and long-term goals, discuss investment risks, and find strategies to meet those goals together. In other words, lay a foundation for mutually respectful give-and-take. That way, you’ll always play a role in decisions, and your knowledge will continue to grow as your financial circumstances evolve.

Remember: Statistics show that most women will be in control of their own finances at some point in their lives, whether they choose to or not. Even if your marriage is long and happy, odds are that you will live longer than your husband. Being comfortable talking about money is an important part of being prepared to handle your financial life as a single women, or holding up your end as part of a partnership. And the sooner you can do it, the better.

“In today’s society, women wear more hats than ever before – they often balance motherhood, successful careers, and still manage the household. Creating a spending plan can feel overwhelming, but it’s an important step in building a strong financial foundation and instilling lifelong lessons in future generations,” Wiggins concluded.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/03/10/how-women-can-become-more-comfortable-discussing-money/feed/1Four Questions To Consider Before Deciding To Keep Your Marital Homehttp://www.forbes.com/sites/jefflanders/2015/02/17/four-questions-to-consider-before-deciding-to-keep-your-marital-home/
http://www.forbes.com/sites/jefflanders/2015/02/17/four-questions-to-consider-before-deciding-to-keep-your-marital-home/#commentsTue, 17 Feb 2015 16:43:00 +0000http://blogs.forbes.com/jefflanders/?p=2268Financially speaking, divorce is all about dividing assets (and debt) –and for many couples, their primary residence is the single largest asset they have to divide. In an April 2014 survey by Securian Financial Group, Inc., nearly two-thirds of respondents reported that their marital home was their most valuable asset as a couple at the time of divorce.

In addition to having the highest monetary value of any asset in many couples’ financial portfolios, the marital residence carries significant symbolic and cultural weight. Home, we are told, is where the heart is… but when the heart is broken, what happens to the house?

There is an unspoken notion that getting the marital residence as part of a divorce settlement represents a sort of triumph, and that the spouse who moves out appears in some ways to have “lost.” It’s no wonder many women report that “who gets to keep the house?” is among the first questions raised by friends and acquaintances upon hearing news of an impending divorce.

Deciding how to handle the marital house in divorce is an excellent opportunity to Think Financially, Not Emotionally®. Acting on feelings about heart and home, rather than on thoughtful analysis of the value and cost of retaining the property as an asset, could lead to a decision you may come to regret.

Here are four key questions to ask when thinking financially about how to handle the marital residence in divorce:

1 – Will you be able to refinance the mortgage?

If you are going to keep the house, your husband will almost certainly want his name off the mortgage, if there is one. Refinancing the mortgage in your name alone presents its own set of challenges. For example, you will have to meet federal requirements concerning your debt-to-income ratio. Critical to this calculation: Alimony and child support are not counted as reliable income until they’ve been received for at least 12 months.

If a “jumbo” mortgage (defined as more than $417,000, in most markets) is involved, the challenges are even more significant.

2 – Can you afford the real cost of owning the marital home?

Your primary residence might be an impressive property with many enviable amenities – no wonder you’d want to hang on to it and continue to live there! However, the larger your home, the more truly expensive it is to own. You’ll need to think carefully about what it will cost you to own the property, and whether it makes good financial sense to hang on to it. Expenses to consider include:

property taxes

homeowner’s insurance

maintenance and repairs

improvements

furnishings

None of these will get less expensive over time. If your income won’t keep up, you may find it’s a strain to stay in the marital home, and that a more modest property would be a better fit.Of course, you’ll have to factor in a variety of practical issues, as well. For instance, if your children are soon to be in college or perhaps already graduated, how much longer will you need three or four bedrooms?

3 – What is the housing market like in your area?

A home can be a tremendously valuable asset – but its value is only fully accessible to you if and when you sell it. In deciding whether the marital home is an asset you want to keep, it is important to consider what the housing market conditions are where the property is located. (Real estate appraisers can help you better understand your local market.) Projections of future conditions are especially important – and no matter how rosy the outlook, there are no guarantees. How long do you expect to live in the house? What are the most reliable projections for housing market conditions in that time span? Can you live with the inherent uncertainty of even the best projections?

4 – What are the tax implications?

If you sell your house for more than you paid for it (plus any capital improvements), you may have a significant capital gain even after your $250,000 exclusion as a single women. You’ll need to pay both state and federal taxes on that gain, and remember: Capital gain taxes are on the rise. The federal maximum was raised in 2013 from 15% to 23.5%, and there have been proposals in 2015 to raise it to 28%.

Here’s a simple example to illustrate my point. Let’s say the appraised fair market value of your house is $1,000,000. You have a $400,000 mortgage, and you originally paid $200,000 for the house. Your selling costs are 6% or $60,000. The $1,000,000 sales price minus $60,000 selling costs = $940,000.

If you approach the decision of whether to keep the marital home through the lens of critical questions like these, you might conclude that you’re in excellent shape to meet the challenges of hanging on to it, and that furthermore, it is what you really want to do with your money. However, it’s also possible you’ll come to see that hanging on to the property might not be your wisest financial option. With that perspective, you need to think of moving out not as a loss, but as an opportunity to move on – to a secure future, with a different home that will make excellent financial sense.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/02/17/four-questions-to-consider-before-deciding-to-keep-your-marital-home/feed/0A Fair and Equitable Divorce — Even During Valentine’s Dayhttp://www.forbes.com/sites/jefflanders/2015/02/10/divorcing-women-use-valentines-day-as-motivation-to-think-financially/
http://www.forbes.com/sites/jefflanders/2015/02/10/divorcing-women-use-valentines-day-as-motivation-to-think-financially/#commentsTue, 10 Feb 2015 14:36:00 +0000http://blogs.forbes.com/jefflanders/?p=2261There’s no getting around it: Divorce is a time of turmoil and upheaval. But on the flip-side, that also makes it an excellent time for new beginnings and fresh starts. So if you’ve begun the divorce process –or even if you’re only thinking that divorce may be in your future –please don’t get sidetracked by all the talk of romance and Valentines this month. There’s no better time than right now to get organized and Think Financially, Not Emotionally®.

What do I mean by that, exactly?

During the divorce process, you will undoubtedly feel a tremendous range of emotions. You might be sad, frightened, bewildered, and furious… even as you also experience relief, hope, and actual exuberance as you begin to think of your husband as your ex-husband. Coping with this mix of strong emotions can make it hard to focus on your immediate goal: to secure the best possible settlement agreement for your financial future as a single woman.

But thinking emotionally when it’s time to negotiate your settlement can lead to short-sighted financial decisions and long-term regrets. Remember that emotions change and fade over time; by contrast, the terms of your divorce agreement will be with you for many years to come, if not forever.

I would never say that you should ignore your emotions or pretend they don’t exist. Not only would that simply not work, it wouldn’t be at all healthy. Your emotional well-being needs care during divorce, and I always urge my clients to have a compassionate therapist as part of their professional divorce team. Cope with your emotions so you can focus on the finances.

Set? Get educated.

The divorce process boils down to dividing marital assets so that you and your ex can live legally separate lives. Many women don’t know a lot about how this all works before they’re in the thick of it. If you see divorce on the horizon, find out what that will mean for you in legal, financial, and practical terms.

In the Community Property States, spouses are considered equal owners of all marital property, and assets are split 50-50 in divorce.

However, most states are Equitable Distribution States, in which the division of assets is typically much more complicated. In an Equitable Distribution State, each spouse has a legal claim to a “fair and equitable” portion of the value of all marital assets, no matter which of them is listed as the legal owner. Note that a “fair and equitable” portion does not necessarily mean “half.” Courts consider many factors to determine what constitutes a fair and equitable distribution of marital property.

Go! Get prepared.

With a support system in place and background information researched, you’re ready for action. As you prepare for divorce, make sure you:

Need even more motivation to get in a financial frame of mind? Take a look at what can happen when some men pull dirty tricks in divorce:

A TV executive is in deep trouble for trying to hide marital assets, violating a court order, and failing to pay child and spousal support. He’ll be spending time in jail and turning over substantially more to his former spouse than if he had played by the rules.

A famous artist and his parents had his wife-to-be sign a prenuptial agreement in a language she didn’t understand – fraudulently assuring her that it protected only his parents’ assets. Now that they’re divorcing, she’s learned that the document waives her rights to her husband’s fortune as well. Fortunately, the prenup has been thrown out in court.

Not only is a New York business owner in hot water because of his divorce; his business partners are in trouble, as well. They reportedly undervalued the husband’s share in the largely cash-based business to deprive the wife of her financial interest in it.

While only the most outrageous cases or famous names make newspaper headlines, underhanded tactics like these are more common than you might think. When you Think Financially, Not Emotionally®, you will be in excellent shape to protect yourself.

As for Valentine’s Day… well, you can be sure that the people who most want your mind on romance this month are those in businesses that stand to make substantial profits from it. The greeting card manufacturers, florists and chocolatiers are thinking financially – and you should, too.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

]]>http://www.forbes.com/sites/jefflanders/2015/02/10/divorcing-women-use-valentines-day-as-motivation-to-think-financially/feed/1Active And Passive Appreciation In The Continuing Story Of Hamm v. Hammhttp://www.forbes.com/sites/jefflanders/2015/01/22/active-and-passive-appreciation-in-the-continuing-story-of-hamm-v-hamm/
http://www.forbes.com/sites/jefflanders/2015/01/22/active-and-passive-appreciation-in-the-continuing-story-of-hamm-v-hamm/#commentsThu, 22 Jan 2015 15:53:00 +0000http://blogs.forbes.com/jefflanders/?p=2254When last we visited the case of Oklahoma oilman Harold Hamm (founder of Continental Resources, the largest leaseholder in North Dakota’s enormously productive Bakken Shale) and his estranged wife Sue Ann, their divorce trial was getting underway. Billions of dollars were at stake, and there was the potential for the largest divorce settlement in history. Divorce professionals, financiers and Continental Resources (CLR) investors alike were interested in the outcome of the case.

When the ruling was made last November, Hamm was ordered to pay Sue Ann Arnall (the former Mrs. Hamm) about $1 billion. The estate had been estimated at about $18 billion.

Her position is fairly straightforward. She had been seeking several billion dollars, and $1B doesn’t represent an equitable distribution of assets from their 26 year marriage. (“How is a billion dollars not enough?” you may be wondering, and while I agree that certainly anyone can live well on a billion dollars, remember this: It isn’t the dollar amount that’s being deemed inadequate, but the equity of the settlement. In Ms. Arnall’s estimation, it’s not that the amount isn’t high enough; it’s that it isn’t fair enough.)

Harold Hamm’s position seems to have changed. His attorney was quoted at the time of the settlement as deeming it “fair.” Mere weeks later, Hamm now says it was “erroneous and inequitable.” Oil prices are at a five-year low, share prices have declined some 30%, and his net worth has reportedly fallen by one-third – and lo and behold, $1B is a significantly higher percentage of his assets than he’s happy to give up to his ex.

Active appreciation is increase in value that can be attributed, at least in part, to the contributions or efforts of either spouse. If you own a company that grows and succeeds because of your ideas, leadership and business acumen, that increase in value is due to active appreciation.

Passive appreciation is increase in value due to outside market forces such as supply and demand and inflation. For example, suppose you’ve owned a parcel of land for 20 years. In all that time, you’ve made no improvements to it whatsoever, but the area around your parcel has been attractively and successfully developed. What was once useless scrub is now considered highly desirable acreage, and with no effort on your part, your parcel is worth substantially more today than when you bought it. The difference is due to passive appreciation.

Here’s the critical factor for the Hamm divorce: Under Oklahoma law, the amount of active appreciation of separate, premarital assets (Hamm started the company before the marriage) is subject to division in divorce; the amount that passively appreciated is not.

For the purposes of settlement negotiation, it was obviously in Harold Hamm’s best interest to argue that the tremendous success of Continental Resources was largely due to the whims of a fickle commodities market, or just good luck… but whatever it was, it had little to do with decision making!

Similarly, it was best for Team Sue Ann to argue that of course Continental’s soaring success can largely be attributed to Harold’s skills (and in part to hers, when she also worked for the company). Certainly there are other oil companies that operated under the same fickle market conditions as Continental, but with different leadership, didn’t fare nearly as well.

The truth, of course, lies somewhere in-between. An argument that a company’s success has nothing to do with the business prowess of its founder doesn’t pass the common sense test. To assert that outside influences don’t hold any sway at all doesn’t make sense either.

Presumably, this was all considered by the Oklahoma court when the Hamm divorce was settled for $1B last November. Still, it looks like divorce professionals, financiers and CLR investors will have more news to look forward to before this is all finally resolved. Stay tuned, but don’t hold your breath — the appeals process could reportedly drag on for years.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.